Fever-Tree shares plunge after it slashes profit forecast

Premium mixers maker Fever-Tree has slashed its annual profit forecast by a third as a result of labour shortages and rising costs, sending its shares down by more than a quarter on Friday.

The high-end tonics and sodas brand said that a dearth of staff in the US had slowed production, while the restricted availability of glass and industry-wide cost pressures had also eroded margins.

These “rapid shifts” in the past eight weeks and the “exceptionally challenging environment” would dent earnings for the year, it warned. As a result, Fever-Tree cut its full-year earnings forecast from £66mn to £45mn.

Shares in the London-listed Fever-Tree group tumbled more than a quarter in early trading to 883p, taking their decline this year to almost 70 per cent.

The grim forecast will come as a blow to investors, including City veteran Nick Train, who owns stock in his £1.8bn Finsbury Growth and Income Trust.

Tim Warrillow, chief executive of Fever-Tree, said he expected “to deliver good revenue growth for the full year” but noted that the logistical and cost headwinds had “significantly worsened in recent months” and were expected to “notably impact” full-year margins.

He added that the business was “working on a large number of initiatives”, and “more closely than ever with suppliers” to mitigate the “transitory headwinds”.

The US staff shortages have forced Fever-Tree to increase production in the UK in order to ship its products to meet demand. However, this has left the company more exposed to sea freight, with rates increasing by up to 50 per cent since the start of the year on key routes.

Analysts at RBC said that the bleaker forecast was “big, even by Fever-Tree’s recent standards”, adding that they were “somewhat surprised” by the cut in guidance given that the pressures on logistics and glass costs had been known for “many months”.

“We take some small comfort from the maintenance of revenue guidance, but given the extent of the profit warning, this poses big questions over both the brand’s pricing power and long-term profit potential, in our view,” they noted.

Despite the pressures, Fever-Tree said consumer demand “remains strong” and it maintained its full-year revenue guidance of between £355mn and £365mn.

Revenue grew 14 per cent in the first six months, compared with the same half a year ago, to £160.9mn.

Customer demand remained “very strong” in the US, the group said, noting an 11 per cent jump in revenue year on year even in the face of inventory shortages affecting sales.

“We are taking significant steps to rebuild inventory levels and given the high level of demand from both customers and consumers, we remain confident of delivering a strong full year revenue performance,” Fever-Tree added.